The U.S. Securities and Exchange Commission (SEC) on Tuesday sued Morningstar Credit Ratings LLC for allegedly violating U.S. securities laws in its ratings of commercial mortgage-backed securities, Reuters reported. Morningstar’s credit ratings business allegedly violated disclosure and internal controls requirements in 30 commercial mortgage-backed securities transactions from 2015 to 2016 when the agency allowed analysts to make undisclosed adjustments to key stresses in its modeling, the SEC said. A spokesperson for Morningstar said the firm had complied with all regulatory requirements and the complaint related to methodology it had voluntarily retired in 2018. The SEC had also not alleged any investor harm, she said. Ratings agencies came under criticism after the U.S. financial crisis as inflated ratings of mortgage-backed securities helped fuel a U.S. housing bubble. In the wake of the crisis Congress charged the SEC with overseeing the ratings agencies, but the agency struggled with the oversight due to insufficient resources and technology changes, Reuters previously reported. Morningstar previously paid $3.5 million to settle SEC charges it violating conflict of interest rules designed to separate credit ratings and analysis from sales and marketing.
